//What is section 80C and section 10D for tax deduction?
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What is section 80C and section 10D for tax deduction?

There are various options available for making investment. But as a taxpayer, we always try to find an option that helps to save our taxes and at the same time gives our family financial cover.

What is Section 80C?

Section 80C, including section 80CCC & 80CCD, prescribes combination of activities. If you want to utilize your income in some of these activities during the Financial Year (FY) you can claim the amount as a deduction from your total taxable income for the FY.

For Example: Assuming you earned a gross total income of  Rs.10,00,000 as taxable income in F.Y. 2020-21 (Assessment Year will be 2021-22 when you will estimate and pay the tax on this income). If you invest Rs.100,000  of this income in any or multiple activities listed under section 80C, your total taxable income will be reduced to Rs.900,000 for the F.Y.

Activities under section 80C can be divided into two parts:

  1. Investment Activities: You park your money in an investment for a minimum specified time and then get it back.
  2. Spending Activities: You spend your money on the activities listed under section 80C.

Investment Activities:

Provident Fund (EPF/VPF)    Public Provident Fund (PPF)  National Saving Certificate (NSC)     Tax Saving 5 years FD from Banks, 5 years Post Office Time Deposit (POTD)      

Senior Citizen Saving Scheme(SCSS),NHB deposit scheme . Life Insurance Premium (Participating Endowment Plans), New Pension Scheme (NPS) (u/s 80CCD) ,Atal Pension Yojana, Equity Linked Savings Scheme (ELSS), Pension Plans from Insurance Companies (u/s 80CCC), Unit Linked Insurance Plan (ULIP)           

Spending Activities:

Tuition fee for 2 children,Stamp duty and registration cost of the House (Only at the time of purchase of house),Home Loan Principal Payment (Purchase of house on loan)

How much can be claimed u/s 80C?

There are limits to the amounts that can be claimed for different activities and the total that can be claimed under these activities.

The total amount that can be claimed under sections 80C, 80CCC and 80CCD(1) combined is Rs.150,000.

What is Section 10 (10D)

Any income received from your life insurance policy is exempted from income tax under this section. This income tax deduction is available for all types of life insurance policy payouts, without any upper limit and including bonuses and surrender value too.

1. Exemption under section 10(10D) is available on any amount received under a life insurance policy. Such amount includes death benefits, maturity benefits and, accrued bonus.

2. The exemption is available on all the forms of life insurance policy claims.

3. The entire amount received under a life insurance policy is exempt under section 10(10D). Meaning thereby that there is no upper limit applicable to the claim against the life insurance policy.

Life Insurance gets the “EEE” benefit, unlike most other savings instruments which get only the EET benefit (Exempt-Exempt-Taxed) wherein even if you get tax benefits on investments, your final received amount is taxed, reducing your overall returns.

EEE stands for “Exempt-Exempt-Exempt” and means that …

  • the amount you invest,
    • the amount that your investment earns, and
    • the amount that you finally receive as proceeds(as bonus, maturity or death benefit)

             are all completely Exempt from Income Tax. 

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